PRECEDENTIAL

UNITED STATES COURT OF APPEALS

FOR THE THIRD CIRCUIT

No. 10-3655

RAHEEL AHMAD KHAN,

individually and on behalf of others similarly situated

v.

DELL INC.,

Appellant.

On Appeal from the United States District Court

for the District of New Jersey

(D.C. No. 3:09-cv-03703)

District Judge: Honorable Joel A. Pisano

Argued on April 28, 2011

Before: SLOVITER, GREENAWAY, JR and ROTH, Circuit

Judges

(Opinion filed January 20, 2012)

2

Kristine M. Brown, Esquire (Argued)

Derin B. Dickerson, Esquire

Alston & Bird, LLP

1201 W. Peachtree Street

One Atlantic Center

Atlanta, Georgia 30309

Craig Carpenito, Esquire

Alston & Bird, LLP

90 Park Avenue

New York, NY 10016-1387

Counsel for Appellant

F. Paul Bland, Jr., Esquire (Argued)

Public Justice

1825 K Street, N.W., Suite 200

Washington, D.C. 20006

Elizabeth Berney, Esquire

Eduard Korsinsky, Esquire

Shannon Hopkins, Esquire

Levi & Korsinsky, LLP

30 Broad Street, 15th Floor

New York, NY 10004

Michael Korsinsky, Esquire

Law Office of Michael Korsinsky

30 Broad Street, 15th

Floor

New York, NY 10004

Counsel for Appellees

3

___________

O P I N I O N

___________

ROTH, Circuit Judge:

This appeal involves a matter of first impression for

this Circuit – whether Section 5 of the Federal Arbitration Act

(FAA) requires the appointment of a substitute arbitrator

when the arbitrator designated by the parties is unavailable.

Dell, Inc., appeals from the District of New Jersey‟s denial of

Dell‟s Motion to Compel Arbitration and Stay Plaintiff‟s

Claims. Dell contends that the District Court erred in denying

its motion to compel arbitration based on the District Court‟s

belief that the arbitration provision was rendered

unenforceable because it provided for the parties to arbitrate

exclusively before a forum that was unavailable when Khan

commenced suit. The District Court also refused to appoint a

substitute arbitrator, finding that it could not compel the

parties to submit to an arbitral forum to which they had not

agreed.

I. FACTUAL BACKGROUND

Dell designed, manufactured, and distributed the 600m

computer from 2003 to 2006. Khan purchased a Dell 600m

computer in September 2004 for approximately $1,200.

Khan purchased the computer online through Dell‟s website,

www.Dell.com. To complete the purchase, Khan was

required to click a box stating “I AGREE to Dell‟s Terms and

Conditions of Sale.” Just beneath the box was a notice

stating:

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The Terms and Conditions of Sale

contain very important

information about your rights and

obligations as well as limitations

and exclusions that apply to you.

They contain limitations of

liability and warranty information.

They also contain an agreement to

resolve disputes through

arbitration, rather than through

litigation. Please read them

carefully.

As Dell‟s notice indicated, its Terms and Conditions of Sale

contained an arbitration provision that reads as follows:

13. Binding Arbitration. ANY

CLAIM, DISPUTE, OR

CONTROVERSY (WHETHER

IN CONTRACT, TORT, OR

OTHERWISE, WHETHER

PREEXISTING, PRESENT OR

FUTURE, AND INCLUDING

STATUTORY, COMMON LAW,

INTENTIONAL TORT AND

EQUITABLE CLAIMS)

BETWEEN CUSTOMER AND

DELL, its agents, employees,

principals, successors, assigns,

affiliates (collectively for

purposes of this paragraph,

“Dell”) arising from or relating to

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this Agreement, its interpretation,

or the breach, termination or

validity thereof, the relationships

which result from this Agreement

(including, to the full extent

permitted by applicable law,

relationships with third parties

who are not signatories to this

Agreement), Dell‟s advertising, or

any related purchase SHALL BE

RESOLVED EXCLUSIVELY

AND FINALLY BY BINDING

ARBITRATION

ADMINISTERED BY THE

NATIONAL ARBITRATION

FORUM (NAF) under its Code of

Procedure then in effect (available

via the Internet at http://www.arb-

forum.com, or via telephone at 1-

800-474-2371). The arbitration

will be limited solely to the

dispute or controversy between

customer and Dell. NEITHER

CUSTOMER NOR DELL

SHALL BE ENTITLED TO JOIN

OR CONSOLIDATE CLAIMS

BY OR AGAINST OTHER

CUSTOMERS, OR ARBITRATE

ANY CLAIM AS A

REPRESENTATIVE OR CLASS

ACTION OR IN A PRIVATE

ATTORNEY GENERAL

CAPACITY. This transaction

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involves interstate commerce, and

this provision shall be governed

by the Federal Arbitration Act 9

U.S.C. sec. 1-16 (FAA). Any

award of the arbitrators shall be

final and binding on each of the

parties . . . . Information may be

obtained and claims may be filed

with the NAF at P.O. Box 50191,

Minneapolis, MN 55405.

Rule 1 of the NAF‟s “Code and Procedure,” referred to

in paragraph 13 above, provided that “[t]his Code shall be

administered only by the National Arbitration Forum or by

any entity or individual providing administrative services by

agreement with the National Arbitration Forum.” Also, as we

can see in paragraph 13, the arbitration provision did not

designate a replacement forum in the event that NAF was

unavailable for any reason. But, as we see, the Terms and

Conditions did incorporate the Federal Arbitration Act.

In addition, the Terms and Conditions provided that

Texas law would govern interpretation of the Agreement and

of any sales. The Terms and Conditions did not contain a

severance provision and any alterations to the Terms and

Conditions required the signature of both parties.

Khan alleged that his 600m suffered from design

defects, causing his computer to overheat and thereby destroy

the computer‟s motherboard. Khan replaced the motherboard

multiple times. After the third replacement, Dell refused to

issue another replacement, claiming the warranty had expired.

The 600m allegedly suffered from other design defects, which

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prevented it from being used in a manner consistent with

Dell‟s marketing.

On July 24, 2009, Khan filed a putative consumer class

action on behalf of himself and other similarly situated

purchasers and lessees of defectively designed 600m

computers sold from approximately 2003 through 2006.

Khan asserted seven claims for (1) violations of the New

Jersey Consumer Fraud Act, (2) breach of express warranty,

(3) breach of implied warranty of merchantability or fitness

for particular purpose, (4) fraud, (5) negligent

misrepresentation, (6) breach of implied covenant of good

faith and fair dealing, and (7) unjust enrichment. At the time

the lawsuit was filed, the NAF had been barred from

conducting consumer arbitrations by Consent Judgment,

which resolved litigation brought by the Attorney General of

Minnesota.1 The Consent Judgment “barred [the NAF] from

the business of arbitrating credit card and other consumer

disputes and [ordered the NAF to] stop accepting any new

consumer arbitrations or in any manner participate in the

processing or administering of new consumer arbitrations.”

This was the result of government investigations revealing

that the NAF engaged in various deceptive practices that

1 See generally “„Arbitration’ or ‘Arbitrary’: The

Misuse of Mandatory Arbitration to Collect Consumer Debts”

Before the Subcomm. on Domestic Policy, Oversight and

Government Reform Comm. 3-5 (2009) (statement of

Minnesota Attorney General Lori Swanson),

http://oversight.house.gov/images/stories/Hearings/pdfs/2009

0722Swanson.pdf (recounting Minnesota Attorney General‟s

findings).

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disadvantaged consumers.

According to Khan, such practices included:

(1) representing to consumers

and the public that it was

neutral;

(2) convincing credit card

companies and other

creditors to include exclusive

arbitration forum provisions

in their contracts and making

representations to such

entities that it would favor

the entities in the

arbitrations; and

(3) identifying and appointing

anti-consumer arbitrators

and withholding referrals to

arbitrators who decided

cases against companies.

Khan also alleged that the Minnesota investigations

found that these practices encouraged some corporations to

select the NAF as their arbitration forum because of this

prospect of favorable results. However, although Khan

suggested that Dell must have chosen the NAF based on its

corporate-friendly disposition, the record does not show that

Dell was aware of these practices at the time that it selected

the NAF as the arbitral forum governing Khan‟s purchase or

that Dell selected the NAF for any improper reason.

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On October 2, 2009, Dell moved to compel arbitration,

arguing that the arbitration provision was binding and

covered all of Khan‟s claims. Khan did not dispute that the

Terms and Conditions governed the contract. Khan did,

however, assert that the arbitration provision was

unenforceable because the NAF, which the arbitration

provision designated as the arbitral forum, was no longer

permitted to conduct consumer arbitrations. Khan further

contended that the NAF‟s designation was integral to the

arbitration provision. He argued, for that reason, that, because

the NAF could not perform its function, the arbitration

provision in the Terms and Conditions should not be enforced

and the parties should proceed to litigation.

On August 18, 2010, the District Court denied Dell‟s

motion to compel arbitration and stay claims. See Khan v.

Dell, Inc., No. 09-3703 (JAP), 2010 WL 3283529 (D.N.J.

August 18, 2010). After surveying the relevant case law, and

acknowledging that “the Third Circuit has not spoken on the

issue,” id. at *3, the District Court found that the clause in the

Terms and Conditions – “SHALL BE RESOLVED

EXCLUSIVELY AND FINALLY BY BINDING

ARBITRATION AND ADMINISTERED BY THE

NATIONAL ARBITRATION FORUM (NAF) under its

Code of Procedure then in effect” – demonstrated “the

parties‟ intent to arbitrate exclusively before a particular

arbitrator, not simply an intent to arbitrate generally.” Id. at

*4. The District Court noted that “[s]ome courts have held

that § 5 [of] the Federal Arbitration Act (“FAA”) provides a

mechanism for the appointment of an arbitrator when a

chosen arbitrator is unavailable”, id. at *2, but that the

designation here of the NAF as the arbitrator was “integral”

to the arbitration clause. Id. (citing Carideo v. Dell, Inc., No.

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C06-1772JLR, 2009 WL 3485933 (W.D. Wash. Oct. 26,

2009), and Ranzy v. Extra Cash of Texas, Inc., No. H-09-

3334, 2010 WL 936471 (S.D. Tex. March 11, 2010)). The

court concluded that granting Dell‟s motion to compel and

appointing a substitute arbitrator would improperly force the

parties to “submit to an arbitration proceeding to which they

have not agreed.” Id. at 4.

II. JURISDICTION AND STANDARD OF REVIEW

A district court decides a motion to compel arbitration

under the same standard it applies to a motion for summary

judgment. Par-Knit Mills, Inc. v. Stockbridge Fabrics Co.,

Ltd., 636 F.2d 51, 54 & n.9 (3d Cir. 1980). “The party

opposing arbitration is given the benefit of all reasonable

doubts and inferences that may arise.” Kaneff v. Delaware

Title Loans, Inc., 587 F.3d 616, 620 (3d Cir. 2009) (internal

quotations omitted). We exercise plenary review of questions

concerning the “validity and enforceability of an agreement to

arbitrate.” Edwards v. HOVENSA, LLC, 497 F.3d 355, 357

(3d Cir. 2007). Although we subject underlying factual

matters to the clearly erroneous standard, id., the “legal

question whether the [appellee] may be compelled to arbitrate

[his] claims” is reviewed under the plenary standard. Pritzker

v. Merrill Lynch, Pierce, Fenner & Smith, Inc., 7 F.3d 1110,

1113 (3d Cir. 1993).

III. ANALYSIS

In this appeal, we must determine whether the

provision in the Terms and Conditions that the NAF be the

arbitrator is exclusive to the NAF and is an integral part of the

agreement between Dell and Khan, thus preventing the

11

appointment of a substitute arbitrator. Because this is a

question of arbitrability, it is governed by the FAA. Puleo v.

Chase Bank USA, N.A., 605 F.3d 172, 180 (3d Cir. 2010).

Congress passed the FAA “in response to widespread judicial

hostility to arbitration agreements.” AT&T Mobility LLC v.

Concepcion, __ U.S. __, __, 131 S. Ct. 1740, 1745 (2011).

The FAA reflects a “liberal federal policy favoring

arbitration.” Moses H. Cone Mem’l Hosp. v. Mercury Constr.

Corp., 460 U.S. 1, 24 (1983). The Supreme Court has

unequivocally stated “that questions of arbitrability must be

addressed with a healthy regard for the federal policy

favoring arbitration.” Id. However, the FAA respects the

“fundamental principle that arbitration is a matter of

contract,” Rent-A-Center, West, Inc. v. Jackson, __ U.S. __, __,

130 S. Ct. 2772, 2776 (2010), and that “arbitration „is a matter

of consent, not coercion,‟” Stolt-Nielsen S.A. v. AnimalFeeds

Int’l Corp., __ U.S. __, __, 130 S. Ct. 1758, 1773 (2010)

(quoting Volt Info. Sci., Inc. v. Bd. of Trs. of Leland Stanford

Junior Univ., 489 U.S. 468, 479 (1989)).

The particular problem presented in this case – the

unavailability of the NAF – is addressed in section 5 of the

FAA, which provides a mechanism for substituting an

arbitrator when the designated arbitrator is unavailable.2 See

2 Section 5 provides:

If in the agreement provision be made for a method of

naming or appointing an arbitrator or arbitrators or an umpire,

such method shall be followed; but if no method be provided

therein, or if a method be provided and any party thereto shall

fail to avail himself of such method, or if for any other reason

there shall be a lapse in the naming of an arbitrator, or

arbitrators or umpire, or in filling a vacancy, then upon the

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Brown v. ITT Consumer Fin. Corp., 211 F.3d 1217, 1222

(11th Cir. 2000) (“Where the chosen forum is unavailable . . .

or has failed for some reason, § 5 applies and a substitute

arbitrator may be named.”). In determining the applicability

of Section 5 of the FAA when an arbitrator is unavailable,

courts have focused on whether the designation of the

arbitrator was “integral” to the arbitration provision or was

merely an ancillary consideration. See, e.g., Reddam v.

KPMG LLP, 457 F.3d 1054, 1061 (9th Cir. 2006), abrogated

on other grounds by Atlantic Nat'l Trust LLC v. Mt. Hawley

Ins. Co., 621 F.3d 931 (9th Cir. 2010); Brown, 211 F.3d at

1222. As the Eleventh Circuit has articulated the standard:

“[o]nly if the choice of forum is an integral part of the

agreement to arbitrate, rather than an „ancillary logistical

concern,‟ will the failure of the chosen forum preclude

arbitration.” Id. In other words, a court will decline to

appoint a substitute arbitrator, as provided in the FAA, only if

the parties‟ choice of forum is “so central to the arbitration

agreement that the unavailability of that arbitrator [brings] the

agreement to an end.” Reddam, 457 F.3d at 1061. In this

light, the parties must have unambiguously expressed their

intent not to arbitrate their disputes in the event that the

designated arbitral forum is unavailable.

application of either party to the controversy the court shall

designate and appoint an arbitrator or arbitrators or umpire, as

the case may require, who shall act under the said agreement

with the same force and effect as if he or they had been

specifically named therein; and unless otherwise provided in

the agreement the arbitration shall be by a single arbitrator.

13

According to Khan, this standard has been met because

the Terms and Conditions designate the NAF as the exclusive

arbitral forum, implying that disputes should not be arbitrated

if the NAF is unavailable. Khan relies on the contract

language that states that all disputes “SHALL BE

RESOLVED EXCLUSIVELY AND FINALLY BY

BINDING ARBITRATION ADMINISTERED BY THE

NATIONAL ARBITRATION FORUM.”

In our view, this language is ambiguous:

“EXCLUSIVELY” could be read to modify “BINDING

ARBITRATION,” “THE NATIONAL ARBITRATION

FORUM,” or both.

Khan, however, points out that the NAF‟s rules are

incorporated into the contract, and that these rules provide

that all arbitrations must be conducted by the NAF or an

entity having an agreement with it. We conclude, however,

that this requirement is also ambiguous as to what should

happen in the event that the NAF is unavailable. The NAF‟s

rules provide that they shall be interpreted in a manner

consistent with the FAA and that, if any portion of the NAF

rules are found to be unenforceable, that portion shall be

severed and the remainder of the rules shall continue to apply.

Our finding of ambiguity is confirmed by the

conflicting interpretations of this language adopted by the

courts that have considered it.

The court in Brown supports Dell‟s position that

“exclusively” modifies “binding arbitration.” The arbitration

agreement in Brown was interpreted as demonstrating an

intent to arbitrate that trumped the designation of a particular

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arbitrator who was no longer available. In Brown, a former

ITT employee argued that the arbitration clause between the

parties – which was virtually identical to the clause here –

was void because the NAF had been dissolved. Id. at 1220,

1222. The Eleventh Circuit found that the unavailability of

the NAF did not destroy the arbitration clause because

Section 5 of the FAA provided a mechanism for appointing a

replacement arbitrator. Id. at 1222. The court did note the

“integral” exception but found that there was no evidence

supporting the employee‟s claim that the forum provision was

integral to the arbitration clause. Id.

Adler v. Dell, Inc., 2009 WL 4580739 (E.D. Mich.

Dec. 3, 2009), also supports Dell‟s position. The facts and

arguments proffered in Adler are identical to those before us.

After noting the “integral” exception, the Adler court

articulated the presumption in favor of enforceability of

Section 5 of the FAA as follows: “when the arbitrator named

in the arbitration agreement cannot or will not arbitrate the

dispute, the court does not void the arbitration agreement.

Instead, it appoints a different arbitrator, as provided in the

Federal Arbitration Act.” Id. at *2. In addition, the Adler

court found the clause “SHALL BE RESOLVED

EXCLUSIVELY AND FINALLY BY BINDING

ARBITRATION ADMINSTERED BY THE NATIONAL

ARBITRATION FORUM” was ambiguous on the issue of

whether the NAF‟s exclusive designation was integral to the

provision or whether the intent to arbitrate superseded the

NAF‟s designation. Id. The court concluded that the

arbitration provision did not meet the standard that an

arbitration provision will fail only when the designation of an

arbitrator is “as important a consideration as the agreement

itself.” Id. at *3.

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On the other hand, in Carideo v. Dell, Inc., No. C06-

1772JLR, 2009 WL 3485933 (W.D. Wash. Oct. 26, 2009), a

case factually similar to this one, the plaintiff who had bought

an allegedly defective Dell computer, brought suit against

Dell. Dell moved to compel arbitration, pursuant to the

arbitration provision that designated the NAF as the arbitral

forum. Applying the Ninth Circuit‟s decision in Reddam, the

court in Carideo held that the parties‟ selection of the NAF

was integral to the arbitration agreement. Carideo, 2009 WL

3485933 at *4. Because the court found that the selection of

the NAF and of its rules was integral to the arbitration

provision, it concluded that appointing a substitute arbitrator

would be a wholesale revision of the arbitration agreement.

Id. at *6. In coming to its conclusion, however, the court

stated that “[i]n general, the FAA provides that where the

chosen arbitrator is unavailable, the court may appoint a

substitute arbitrator.” Id. at *3 (emphasis added). We do not

agree with the language used by the Carideo court. We note

that Section 5 provides that in the case of an unavailable

arbitrator, “upon the application of either party to the

controversy the court shall designate and appoint an

arbitrator.” 9 U.S.C. § 5 (emphasis added). The difference

between may and shall significant. We do not find Carideo

persuasive.

Although courts are divided on the issue, we conclude

that the “liberal federal policy in favor of arbitration”

counsels us to favor the Brown line of cases. The language

relied on by Khan is at best ambiguous as to whether the

parties intended to have their disputes arbitrated in the event

that NAF was unavailable for any reason. Because of the

ambiguity, it is not clear whether the designation of NAF is

ancillary or is as important a consideration as the agreement

16

to arbitrate itself. See Brown, 211 F.3d at 1222. Therefore,

we must resolve this ambiguity in favor of arbitration. See

Seus v. John Nuveen & Co., Inc., 146 F.3d 175, 186 (3d Cir.

1998), overruled on other grounds by Green Tree Fin. Corp.

Al. v. Randolph, 531 U.S. 79 (2000).

We note moreover that the arbitration provision in the

Terms and Conditions specifically incorporated the FAA, 9

U.S.C. §§ 1-16, suggesting that, in the event of the NAF's

unavailability, the FAA's procedures for addressing such a

problem should apply. Finally, we note the notice, provided

to Khan when he accepted the Terms and Conditions, which

stated that they “contain an agreement to resolve disputes

through arbitration, rather than through litigation.”

Khan, however, argues that, even if the NAF‟s

designation as the arbitral forum was not integral to the

Terms and Conditions, Section 5 of the FAA nevertheless did

not apply here because NAF‟s unavailability was not a

“lapse” within the meaning of statute. In support of this

argument, Kahn cites In re Salomon Inc. S’holders’

Derivative Litig., 68 F.3d 554, 560 (2d Cir. 1995), a case in

which the arbitral forum, the NYSE, had refused to arbitrate.

Khan argues that the word “lapse” in Section 5 of the FAA

means “a lapse in the naming of the arbitrator or in the filling

of a vacancy on a panel of arbitrators or some other

mechanical breakdown in the arbitrator selection process,”

not the NYSE‟s refusal to arbitrate the dispute – or the NAF‟s

unavailability to do so.

We find In re Salomon unpersuasive. First, we do not

see why the NAF‟s unavailability is not a “mechanical

breakdown in the arbitrator selection process.” Apparently,

17

the NAF‟s Consent Judgment with the State of Minnesota

prevents it from acting as an arbitrator. This unavailability

appears to us to be a breakdown in the mechanics of the

appointment process. To take a narrower construction of

Section 5 would be inconsistent with the “liberal federal

policy in favor of arbitration” articulated in the FAA.

We conclude therefore that the unavailability of NAF

to hear the disputes between Khan and Dell constitutes a

“lapse” within the meaning of Section 5.3

IV. CONCLUSION

The contract‟s language does not indicate the parties‟

unambiguous intent not to arbitrate their disputes if NAF is

unavailable. Section 5 of the FAA requires a court to address

such unavailability by appointing a substitute arbitrator. The

District Court‟s contrary conclusion is at odds with the

fundamental presumption in favor of arbitration. We will

therefore vacate the judgment of the District Court and

remand this case for further proceedings consistent with this

opinion.

3 Because the District Court denied Dell‟s motion to

compel arbitration, it did not address Khan‟s alternative

argument that the arbitration provision in the contract is

unconscionable. We leave it to the District Court to address

this argument on remand.

1

Raheel Ahmad Khan v. Dell, Inc., No. 10-3655 SLOVITER, Circuit Judge, dissenting. The majority opinion acknowledges that the Supreme Court has stated the “fundamental principle that arbitration is a matter of contract,” Rent-A-Center, West, Inc. v. Jackson, ____ U.S. ____, 130 S. Ct. 2772, 2776 (2010). Indeed it has so stated more than once. I dissent because the majority has given mere lip service to this “fundamental principle,” and its holding as applied in this particular case violates that principle. There is no ambiguity in the arbitration agreement.

The plain text of the arbitration agreement clearly states that the selection by Dell of the NAF as arbitrator was integral to the agreement, and leads me to conclude that Section 5 of the FAA is inapplicable and the unavailability of the NAF precludes arbitration. The arbitration clause in Dell’s Terms and Conditions of Sale states:

13. Binding Arbitration. ANY CLAIM, DISPUTE, OR CONTROVERSY (WHETHER IN CONTRACT, TORT, OR OTHERWISE, WHETHER PREEXISTING, PRESENT OR FUTURE, AND INCLUDING STATUTORY, COMMON LAW, INTENTIONAL TORT AND EQUITABLE CLAIMS) BETWEEN CUSTOMER AND DELL, its agents, employees, principals, successors, assigns, affiliates, (collectively for purposes of this paragraph, “Dell”) arising from or relating to this Agreement, its interpretation, or the breach, termination or validity thereof, the relationships which resulted from this Agreement (including, to the full extent permitted by applicable law, relationship with third parties who are not signatories to this Agreement), Dell’s advertising, or any related purchase SHALL BE RESOLVED EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTERED BY THE NATIONAL ARBITRATION FORUM (NAF) under

2

its Code of Procedure then in effect (available via the Internet at http://www.arb-forum.com, or via telephone at 1-800-474-2371). The arbitration shall be limited solely to the dispute or controversy between customer and Dell. NEITHER CUSTOMER NOR DELL SHALL CONSOLIDATE CLAIMS BY OR AGAINST OTHER CUSTOMERS, OR ARBITRATE ANY CLAIM AS A REPRESENTATIVE OR CLASS ACTION OR IN A PRIVATE ATTORNEY GENERAL CAPACITY. This transaction involves interstate commerce, and this provision shall be governed by the Federal Arbitration Act, 9 U.S.C. sec. 1-16 (FAA). Any award of the arbitrator shall be final and binding on both of the parties . . . . Information may be obtained and claims may be filed with the NAF at P.O. Box 50191, Minneapolis, MN 55404.

App. at A67.

The majority reasons that this language is “ambiguous” because “‘EXCLUSIVELY’ could be read to modify ‘BINDING ARBITRATION,’ ‘THE NATIONAL ARBITRATION FORUM,’ or both,” see Majority Opinion supra page 13, and that the “liberal federal policy in favor of arbitration” thus compels the court to resolve this “ambiguity” in favor of arbitration. See Majority Opinion supra page 15. However, “the FAA’s proarbitration policy does not operate without regard to the wishes of the contracting parties.” Mastrobuono v. Shearson Lehman Hutton, Inc., 514 U.S. 52, 57 (1995). The majority’s conclusion focuses solely on the language used rather than giving appropriate weight to the additional clues that demonstrate the parties’ clear intent. The phrase “EXCLUSIVELY AND FINALLY BY BINDING ARBITRATION ADMINISTRATED BY THE NATIONAL ARBITRATION FORUM” is written in all capital letters yet surrounded by clauses written in lower case letters. This aesthetic prominence indicates the parties’ intent for the entire phrase to be read together and emphasized as an essential part of the agreement. Moreover, as noted by the District Court, “[t]he NAF is expressly named, the NAF’s

3

rules are to apply, . . . no provision is made for an alternate arbitrator [, and the] language used is mandatory, not permissive.” App. at A12. The agreement also states that “[i]nformation may be obtained and claims may be filed with the NAF at P.O. Box 50191, Minneapolis, MN 55404,” again illustrating the central role that NAF was intended to play in arbitrations pursuant to this agreement. Given “the consensual nature of private dispute resolution,” courts must respect the principle that “parties are generally free to structure their arbitration agreements as they see fit.” Stolt-Nielsen S.A. v. AnimalFeeds Int’l Corp., 130 S. Ct. 1758, 1774 (2010) (internal quotation marks and citation omitted). Here, the parties agreed only to binding arbitration administered by the NAF. Full analysis of the plain text of the agreement as a whole shows that the selection of the NAF as arbitrator was an integral part of the agreement to arbitrate. Therefore, Section 5 of the FAA is inapplicable and the unavailability of the NAF precludes arbitration. I respectfully dissent. There is yet another reason why Dell’s request to proceed via arbitration rather than trial should not be granted, and that reason applies to this defendant in this case. The majority avoids any discussion of the underlying reason why arbitration by NAF is unavailable. In an action pending in Minnesota, the Minnesota Attorney General made public the results of its year-long investigation that showed that NAF, far from being the neutral arbitration forum contemplated by Congress when it enacted the Federal Arbitration Act, represented to corporations that it would appoint anti-consumer arbitrators and discontinue referrals to arbitrators who decided cases in favor of consumers. See Amicus Curiae Br. at 8, 13-15; see also Arbitration or “Arbitrary”: The Misuse of Mandatory Arbitration to Collect Consumer Debts: Hearing Before the H. Domestic Policy Subcomm. of Comm. on Oversight and Gov’t Reform, 111th Cong. (July 22, 2009). Rather than disputing the allegations, NAF accepted a consent judgment that barred it from administering and participating in all consumer arbitrations. See id. (testimony of Lori Swanson, Minnesota Attorney General, at 3) (“Under the Consent Judgment, [NAF] is barred from the business of

4

arbitrating credit card and other consumer disputes and must stop accepting any new consumer arbitrations or in any manner participate [sic] in the processing or administering of new consumer arbitrations.”); see also App. at A273-76. It cannot be insignificant that Dell named NAF as the exclusive forum in its arbitration clauses. It followed that the District Court refused Dell’s request to designate a substitute arbitrator. It was certainly not error for the District Court in this case to deny substitution at the behest of Dell. Even assuming that in the usual case, substitution of a neutral arbitrator would be an acceptable alternative, it is evident that this is not an ordinary case and we should affirm the District Court’s denial of Dell’s motion.